Although the Chancellor has yet to begin the official selection process, a decision is expected by the end of the year. Paul Tucker, one of the Bank's two deputies, is still considered the frontrunner but George Osborne is said to be keen on an external candidate – with the Tory peer thought to be a strong contender.

Lord Sassoon, the commercial secretary to the Treasury, has been named in a new book, The Bank: Inside the Bank of England, by Dan Conaghan, a corporate financier and former Telegraph journalist. "His name crops up with regularity, particularly among Bank insiders. He is close to the Prime Minister, the Chancellor and to Matthew Hancock MP, the Chancellor's right-hand man," Mr Conaghan writes.

Until now, Lord Sassoon, 56, a former UBS investment banker, has not been linked with the role. But he has cross-party appeal, having served as Alistair Darling's City ambassador before joining the Coalition government.

He was also the architect of the new regulatory framework, having recommended the Financial Services Authority (FSA) be disbanded and macro-prudential powers be handed to the Bank in his White Paper on financial reform for the Tories when in opposition.

An external appointment would be the first in 30 years, but it is believed to be under consideration because of the Bank's changed role.

Lord Green, the trade minister and former HSBC chairman, is also thought to be favoured by the Chancellor. Sir John Vickers, the former Bank chief economist who chaired the Independent Commission on Banking, is also in the frame. Mark Carney, the Bank of Canada Governor, is considered an outside chance.

The Treasury, Bank and Lord Sassoon declined to comment on succession plans.